I’ve been thinking about a analyzing a public company to see if it’s worth investing in. The company operates in a new market. I’m interested in the market, but I know zero about it or its players. From some preliminary general research, I realized I didn’t know what I didn’t know and didn’t know where to look. My research felt too broad, and I needed a better way to understand the lay of the land in this new market.

Several months ago, I meet an early-stage founder who’s building her company in the market adjacent to this public company. She’s sharp and knows her market like the back of her hand because she worked in it for over a decade at her previous employer. I enjoy chatting with her and always help however I can when she asks for something.

This week we met. I explained to her my desire to understand this new market and the products the publicly traded company offers. In 20 minutes, she gave me a masterclass. She described the competitors, the long-term risks for the public company’s current products, and the nuances of the products offered in this market by each competitor. She even referred me to a white paper that she thinks I’ll find useful.

That 20-minute conversation probably saved me ten-plus hours of research. I feel more excited about the market because the founder confirmed my hunch: it’s small but exploding. I also feel like I know what areas of the market I need to understand deeply before making any investments.

My takeaway from this was that sharp, early-stage founders know their markets cold and can be great resources if you’re trying to quickly get up to speed on a market.

‍

I was thinking more about how Thrive Capital’s investment in Carvana positioned them to distribute 0.2 times the cash their investors put into the 2022 fund (see here). That distribution happened in 2025, which was after only two to three years, depending on when the fund closed. For a fund that invests in private companies to return $0.20 for every $1 invested in the fund in just two to three years is amazing. Like I said yesterday, it usually takes five to seven years before any cash is returned.

When you consider the current landscape, in which venture capital (VC) and private equity (PE) funds haven’t been able to return much cash to their investors, that cash distribution looks even more impressive. Many investors in PE and VC funds want to use cash returns from previous investments in PE and VC funds to fund new ones. But that’s hard when your old fund investments aren’t returning cash.

The Carvana investment was definitely an exception. Recovering from a 96% loss to a handsome profit isn’t the norm. But what really stood out to me was that Thrive was investing in private and public technology companies simultaneously. Investing in private start-ups and growth-stage companies requires a unique skill set. You’re trying to make a transaction happen between two sophisticated buyers. Public-market investing is a different animal. You have no idea who you’re buying from; they may or may not be more sophisticated than you. It’s an auction-driven market where price is determined by supply and demand flows.

From my experience, it’s common for investors to be comfortable in either private- or public-market investing, but not both. It’s uncommon for VC investors to simultaneously invest in public companies. Nor is it common for firms that focus on investing in the stock market to invest in early-stage or growth start-ups simultaneously. The skill sets are just so different. Also, for companies that invest mainly in public markets, it’s hard to invest in private companies when your investors have daily redemption rights. You might not be able to sell an illiquid position quickly enough to meet those redemption requests.

With that said, I think that being skilled in both areas is a huge advantage for an investor. Especially a technology investor. For example, understanding early-stage private companies can give them an edge in recognizing an amazing company before other public-market investors understand the company’s potential (think Amazon in the early 2000s through early 2010s). And vice versa, understanding how various public-market companies’ business models work and how public investors value them can help with pricing private deals and adding strategic value to the founder or management team.

I’m a fan of both; I think investors who can be proficient in both have a leg up on their competition. Personally, right now, I’m enjoying learning about and investing in public markets.

I read an article today about Thrive Capital (see here), which is a venture capital firm. They recently finished raising $10 billion for their 10th fund (see here). The first article details how some of Thrive’s earlier funds haven’t provided investors with great cash distributions. For example, their 2011 vintage fund has returned only $1.30 for every $1 invested. The fund still holds investments that haven’t been sold, so that will likely go up at some point as they sell more investments. The article discusses other later funds that have returned more cash to investors than the 2011 fund.

An interesting data point in the article was that Thrive’s 2022 fund has already returned 20% of the cash investors initially put into the fund. Usually, it takes 5 to 7 years before investors in venture capital funds see any cash back, so that’s a good amount of cash returned in a short time. That's good enough to put that fund in the top 5% of funds launched that same year. So how did they pull that off so fast?

In March 2022, the stock market was tanking, and Thrive bought a large amount of Carvana stock. This public stock investment eventually led to a $522 million profit, more than quadrupling Thrive’s investment. That’s why the 2022 vintage fund was eventually able to distribute $454 million in capital to investors by early 2025. But the key word is “eventually.”

I did some digging and found another article about this investment (see here). Apparently, the investors in the fund weren’t always happy about the Carvana investment. I wondered why, so I did more digging.

Assuming that Thrive bought Carvana stock at its cheapest point in March 2022, they paid about $98 per share. (It’s not likely that they timed the bottom that precisely, but let’s assume they did.)

Carvana stock went on to crash the rest of the year. The company laid off a large number of people in November (see here) as credit losses mounted, and the stock reached a low of $3.55 on December 7, 2022, when the company flirted with bankruptcy. So, from the time Thrive invested in March, the stock lost over 96% of its value in a span of just eight or nine months. Let’s assume that Thrive invested around $170 million, which they saw dwindle to about $6 or $7 million on paper. That's an unrealized paper loss of over $160 million by December 2022. They had to report performance periodically to investors, including those paper losses, and I can’t imagine that went over well. It certainly explains why some investors weren’t supportive of the Carvana investment.

The good news for investors is that Thrive didn’t sell. They rode the investment back up. This article was written in May 2025, so their shares were sold before that. Assuming they sold at the peak in early 2025, they sold for around $290 a share. (Again, not likely they timed the top, but let’s assume they did.) That means they rode the investment from $98 to $3.55 to $290. That’s a wild ride and probably not one the Thrive team or their investors enjoyed. But in the end, they were able to distribute $454 million back, and as of the writing of that article, they still held $65 million in shares (which have increased in value substantially since then).

What a fascinating story. It was a great reminder that investing isn’t always a straight line up. The key is to have faith in the company, its management, and the market they’re operating in.....along with a little bit of luck (Thrive’s investment would have gone to zero if Carvana had filed for bankruptcy). If you’ve backed the right horse and jockey and they’re running in the right race on the right track (i.e., market), maintaining your conviction can pay off, but that doesn’t mean it won’t be without pain before the payout. And conviction definitely doesn’t guarantee you won’t lose money, as Thrive came close to doing.

‍

This week, I looked deeper into publicly traded software and technology companies. Over the last two or three months, some of these names are down over 30%. I wanted to know if they’ve become cheap and could appeal to value-minded investors.

Now, a lower stock price doesn’t mean a company is being offered at a cheap price (see cheap vs. low here). The only way I can determine if something is cheap is by determining its value first and then comparing its value to the price at which it’s being offered. If its price is below its value, it’s likely cheap.

I picked a few names and did some quick, back-of-the-envelope math to value them. I looked only at software and technology companies that were increasing in three areas: revenues (or equivalent), cash provided by operating activities, and free cash flow. Said differently, they had to be increasing top line, generating more cash, and putting more cash in their bank account.

I determined how much net cash each company has on its balance sheet. Think cash, treasuries, etc., minus short- and long-term debt. For example, a company has $ 4 billion in cash equivalents but $1 billion in total debt. Its net cash position is $3 billion.

I then subtracted that net cash amount from the market capitalization (i.e., valuation) to determine the enterprise value of the company. For example, a company with a $10 billion market cap but $3 billion in net cash has an enterprise value of roughly $7 billion.

Next, I looked at the statement of cash flows to determine the trailing 12 months of cash provided by operating activities. Some people like free cash flow, but I like cash provided by operating activities because it’s a good estimate of how much cash the company generated from its core business and could hypothetically distribute to shareholders. Again, this isn’t the perfect figure to look at, but for quick, back-of-the-envelope math, it does the trick for me.

I then divide the enterprise value by the trailing 12 months of cash provided by operating activities to determine the operating cash flow yield. For example, a company with a $7 billion enterprise value that generated $700 million in cash from operating activities in the last year is generating a 10% annual operating cash yield on an investment made at a $7 billon enterprise value. In theory, over 10 years (assuming no growth, no taxes, etc.), the company would generate an additional $7 billion in cash. It could distribute that $7 billion to shareholders, which means anyone who bought at a $7 billion enterprise value would have made their money back over those 10 years. Alternatively, if no distributions were made to shareholders, there’d be an extra $7 billion in the company’s bank account, so net cash would increase by $7 billion (assuming they didn’t reinvest any of the cash). This is a simple example that ignores lots of potential nuance, but you get the gist.

The result of my analysis was eye-opening. Some of the software and technology names I examined (mid- and small-cap companies) were trading at very attractive yields considering that the current 10-year treasury is ~4% and historically it’s ~6% (see here). One mid-cap software name was trading at an almost 9% yield. It’s an application software company, so the threat of AI is a real unknown for them and the durability of their cash flows isn’t crystal clear right now. But that’s still an attractive yield for a company that’s currently growing at over 20% and whose growth rate likely won’t go down in the short-term to medium-term.

My gut feeling is that the baby might have been thrown out with the bathwater. Some software and technology names are currently offering attractive operating cash yields. There’s more risk than with something like a 10-year treasury, for sure, but I’d imagine that savvy, value-oriented investors are analyzing these companies and closely watching the ones with strong moats that AI can’t easily erode and whose cash flows seem durable and likely to continue increasing.

I can’t predict the future, but my rough math indicates that today, some (not all) public software and technology company valuations reflect reduced potential downside (risk) and increased potential upside (reward).

I’m curious to see how things in the stock market play out going forward.

We’ve heard from lots of headlines and chatter that public software companies have seen their valuations dive. The stock market has seen more sellers than buyers for shares of these companies. Many narratives exist (a common one is that AI will disrupt these companies), but I’m not sure what the root cause of this multi-month sell-off is.

One thing I’m curious about is whether, and if so how, this tech sell-off will impact 2026 IPOs of tech companies. So far this year, we’ve seen 58 total IPOs (not just tech). This is about 31% above 2025, which had 44 by this time. So far, that’s strong.

With talk about SpaceX and other technology companies aiming for 2026 IPOs, I’m curious about whether the current turmoil will subside or persist, which likely will determine whether these IPOs will happen as planned or be shelved.

This is something I’ll be watching closely.

For several months, a close friend has been seeking to understand how to calculate a company's intrinsic value. I shared several books with him, but that didn’t do the trick. So, I told myself that the next time I was analyzing a company and calculating its intrinsic value, I’d loop him in.

Publicly traded software companies have been crashing for several weeks. They’ve reached levels where I suspected they might be priced below their intrinsic value. As I analyzed one company, I fired off a text message to my buddy asking if he wanted to go through it alongside me. Yes, he said.

An hour later, we’d walked through the financials of Snap Inc. (i.e., Snapchat) and he’d calculated an estimate of the company’s intrinsic value.

I learned a few things from the exercise. First, all the books in the world can’t replicate learning through doing. Working through a live example is the best way to learn, in my opinion. Second, it helps tremendously to have someone who understands the area help you learn something new. They can push you, explain nuances, and drastically accelerate learning (but they can’t do the work for you!). Last, the best way to learn something is to teach it to someone else. Explaining this process to my buddy forced me to identify gaps in my understanding and figure out simple ways to communicate complex things.

Overall, this was a fun exercise, and I’m glad I did it. I think this skill will help my buddy a ton, and I learned new ways to explain this topic simply.

Yesterday, I shared that Alphabet (Google’s parent company) was planning to issue some 100-year bonds. According to a Bloomberg article (see here), they were planning to raise around $20 billion. But they ended up raising almost $32 billion in debt in less than 24 hours. It looks like they sold $20 billion in debt Monday. And then raised another almost $12 billion in pounds sterling and Swiss francs. I don’t know why they’d raise in those denominations, and I’m curious to learn more about bonds and why they chose this strategy in particular.

I’m eager to learn more about the world of bonds, and this seems like the perfect time.

In November, I read a book that’s stuck with me. Dangerous Dreamers was a historical recounting of the events that set the stage for the junk-bond and LBO explosion in the 1980s. I was intrigued by how an obscure book and an insight that fast-growing companies couldn’t borrow money in the bond markets at the time sparked Michael Milken’s idea to create (and control) the market for high-yield—junk—bonds.

Ever since then, I’ve been interested in learning more about bonds of publicly traded companies (and governments) and the public market for them. I’ve bought several books and started tracking down people who work in these markets to talk with. Lots to learn, but I think it’ll be a fun multiyear project. I suspect it will complement what I’ve learned from analyzing and investing in public stocks.

Today I read an article (see here) that made me want to begin this project sooner rather than later. It was reported that Alphabet (Google’s parent company) is thinking about issuing a 100-year bond. From what I can gather, a bond with a 100-year duration is very rare and hasn’t been issued by a technology company since 1997 or so.

Reading that article highlighted that I don’t know what I don’t know about the bond market, and it made me more curious and more eager to fill my knowledge gaps. Hopefully I’ll be able to carve out time soon to start reading my new bond books.

I’m still curious about the United States from 1968 to 1982. It was a crazy period that saw inflation peak of about 12%, the federal funds rate reaching almost 20%, and the stock market performing poorly. One thing I want to understand more deeply is the reasons underlying the stock market’s performance. Increasing interest rates push down company multiples and valuations, so that makes sense to me. But I think there’s more to know.

I was listening to a podcast when the guest mentioned that Warren Buffett wrote an article in Fortune magazine in May 1977 that explained how inflation robs equity investors. They spoke very highly of the article and explained part of it, which piqued my interest. So, I’m going to find that article and give it a read. Hopefully, I’ll grasp what Buffett was saying and can share my understanding.

‍

For the past few years, many people have been talking about diversifying their cash flow. They usually land on the idea of buying a small business that can shoot off cash to them—specifically, buying a mom-and-pop business from someone looking to retire. Buying from a retiring entrepreneur is attractive because revenue can probably be increased by upgrading the business through technology and process improvements. The business’s value increases (assuming multiples stay flat or rise), and its rising revenue translates into higher cash flow (i.e., a higher yield on investment).

This all makes sense, and I generally like how this plan sounds. As time has passed, though, I’ve noticed two hurdles for friends turning this plan into reality.

The first challenge is sourcing. This is true of all investing. How do you find the best opportunities that will generate the highest return—especially when you’re going after tiny companies that don’t publish financial information about their business performance? To properly source good deals that others aren’t aware of, you likely need a great network that’s tapped into baby boomer entrepreneurial circles, and you need to work it aggressively. Or, you could just brute-force it and start cold-calling businesses. Either strategy requires a ton of time and energy.

The second challenge is operational. Entrepreneurs are usually the glue that holds small businesses together (especially those with annual revenue under $1 million). There isn’t enough money to support hiring a staff and becoming an absentee owner. So, once the owner sells and retires, the new owner will have to step in to hold things together and implement improvements to grow the business. Again, lots of time and energy is needed.

After seeing these two hurdles (and others) stop friends, I began wondering if there’s an alternative way to solve the problem, ideally more passively. Could you diversify your personal cash flow by buying a stream of income generated by a business and benefit from some upside potential? Can you do this in a more passive way that doesn’t require as much time and energy but gives you above-average returns (assuming a risk level similar to that of buying a business)?

I think I found an alternative solution. I’ll share my thoughts on it in another post.